Opinion

China has hollowed out many US Companies with the help of Wall Street and Private Equity. How does the US bounce back?

Inside the US playbook to secure technology, trade, and capital against adversarial powers

October 31, 2025

Inside America’s new foreign investment controls and economic realignment

United States strategy for economic resilience: A multi-front approach

The challenge of foreign influence—particularly that driven by the strategic policies of the People’s Republic of China (PRC), often facilitated by global financial actors like Private Equity (PE) and Wall Street—requires a comprehensive, multi-pronged response.

The U.S. strategy focuses on three main pillars: Proactive Domestic Investment (Industrial Policy), Protective Measures (Investment Screening & Controls), and Global Re-alignment (Trade & Tax Reforms).

I. Proactive Domestic Investment (Industrial Policy)

Decades of prioritizing market efficiency led to the offshoring of critical supply chains. The U.S. is now shifting toward an industrial policy aimed at restoring self-sufficiency and technological leadership in strategic sectors.

The new US doctrine: balancing economic security with open-market principles

II. Protective Measures (Investment Screening and Controls)

To stop foreign adversaries from acquiring or exploiting U.S. technology and capital, the U.S. is strengthening its defensive mechanisms.

A. Restricting Inbound Investment (CFIUS)

The Committee on Foreign Investment in the United States (CFIUS) reviews foreign investments in American businesses for national security risks. Recent efforts focus on expanding its scope:

Non-controlling stakes: Extending review authority beyond majority acquisitions to include non-controlling or minority investments that still grant access to critical technology, infrastructure, or sensitive data.
Critical sectors: Intensifying scrutiny of investments in emerging technologies (AI, quantum computing, biotechnology), critical infrastructure, and raw materials.

B. Screening Outbound Investment (New Controls)

This is a relatively new and significant measure aimed directly at Wall Street and Private Equity firms.

Executive order (EO) on outbound investment: The U.S. has established mechanisms to review and potentially restrict U.S. investments (including PE and Venture Capital) into foreign entities involved in sensitive technologies (like semiconductors, AI, and quantum) in “countries of concern.”
Mandatory notification: Establishing a mandatory notification system for certain outbound investments, even if they are not prohibited, allows policymakers to gather data and identify emerging risks.

III. Trade and Financial Market Reforms

These reforms aim to level the playing field by adjusting the rules of global engagement and addressing the financial incentives that facilitate offshoring.

A. Trade Policy Tools

Targeted tariffs: Maintaining and adjusting tariffs on specific Chinese goods to counteract unfair trade practices, intellectual property theft, and state-backed dumping.
Repealing PNTR review: Proposals exist to potentially repeal China’s Permanent Normal Trade Relations (PNTR) status, which would reintroduce annual reviews of its trade practices and provide the U.S. with additional leverage.

B. Tax and Pension Reforms

Eliminating tax expenditures: Considering legislation to remove federal tax benefits for investments in companies identified as threats to national security (e.g., those on U.S. Entity Lists).
Fiduciary standards: Reviewing rules for pension funds (like 401(k) plans) under the Employee Retirement Income Security Act (ERISA) to ensure retirement assets are not channeled into foreign adversary companies. This seeks to eliminate a major source of U.S. capital flowing into questionable foreign enterprises.

C. Enhanced Enforcement and Transparency

Export control enforcement: Improving the capabilities of the Bureau of Industry and Security (BIS) to enforce export controls and prevent key U.S. technologies from reaching strategic foreign entities.
Investment data transparency: Requiring more detailed and granular public reporting on U.S. direct investment in China by sectors, giving policymakers better visibility into economic dependencies.

In summary, the U.S. is moving away from purely reactive trade defense toward a strategy that proactively builds domestic capabilities while selectively decoupling and protecting its financial and technological assets from adversarial influence.

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